As Comcast's bid to purchase NBC Universal goes through a federal review, the U.S. government is investigating the effect the deal might have on Internet-based video services like Apple's iTunes Store.

A new report from The Wall Street Journal revealed that the U.S. Justice Department's antitrust division is taking a close look at Comcast's intended $13.75 billion purchase of the television and movie unit under the NBC Universal umbrella, currently owned by General Electric. It is said that the federal scrutiny is not likely to kill the deal, but the government is still interested in whether Comcast, the largest cable provider in the U.S., would block content deals with Internet-based video services like iTunes.

"The regulators are considering the issue as the video market is undergoing its biggest transformation in decades," authors Jessica E. Vascellaro and Thomas Catan wrote. "A range of companies — Netflix Inc., Tivo Inc., and Apple Inc. among them — are racing to provide access to video over the Internet, and a growing number of them are serving up content to Web-connected televisions as well as computers. That is further encroaching on the turf of cable and satellite companies, which are trying to co-opt the threat by launching Web-video services of their own."

Interestingly, recent rumors have suggested that three of the four largest networks in the U.S. — ABC, CBS and Fox — are currently negotiating with Apple to offer 99 cent TV show rentals through iTunes. Absent from that list: NBC.

Previously, Apple had hoped to offer a subscription-based TV plan with major networks. But that deal never materialized, and reports indicated that a Comcast-owned NBC was unlikely to be a part anyhow.

The Journal noted that current federal rules require cable companies that own content to make the programming available on reasonable terms to competitors. Satellite-based operators Dish Network and DirecTV want those terms extended to content made available over the Internet.

Sources indicated to the paper that the Justice Department is concerned that a Comcast-NBC deal would give the company an incentive to block digital distribution services.

Cable companies like Comcast remain one of the biggest hurdles for Apple in its attempts to grow its digital distribution business. Earlier this summer, Chief Executive Steve Jobs acknowledged that his company's Apple TV business remains a hobby because it's hard to break in to a market where consumers are used to receiving a cable box for free or $10 per month.

"The only way that's ever going to change," Jobs said, "is if you can really go back to square one, tear up the set top box, redesign it from scratch with a consistent UI across all of these different functions, and get it to consumers in a way they're willing to pay for it. And right now, there's no way to do that."

Recent rumors have suggested that Apple will launch an all-new version of the Apple TV running the same iOS operating system that powers the iPhone, iPad and iPod touch. Such a device could have access to the App Store and allow developers to create special applications for the set top box.

The new Apple TV, rumored to be called iTV, could be introduced as soon as this Wednesday, when Apple has scheduled a media event to unveil new products.

This is part of the answer to question "should Apple buy a cable provider?" The answer is no, unless they really want to invite this kind of scrutiny, not just over the purchase, but probably over every move they make forever after. Being both a producer and deliverer of content looks a lot like vertical integration, which isn't illegal per se. But if you're big enough to potentially use the integration for anticompetitive purposes, then the regulators are going to take competitors' complaints seriously.

On the flip side, they will plug Comcast. And I am not a fan of this monopoly. Honestly I wish Comcast gets split up like Ma Bell. Having just one choice for cable sucks. You can't stick a dish in some apartments and U-Verse just recently became available with Ridiculous pricing.

This is part of the answer to question "should Apple buy a cable provider?" The answer is no, unless they really want to invite this kind of scrutiny, not just over the purchase, but probably over every move they make forever after. B.

I think it makes exactly the opposite point.
If you're a big enough corporation, you can essentially buy the regulators.
There's no reason on earth that the NBC/Comcast merger should be allowed to proceed, but its being taken as a rubber stamp, as noted earlier in the article.